Distributed Water

Ever since the green revolution of the middle of the last century, food, at least in the developed world, has not been a scarce commodity.By the introduction of more productive varieties of cereals, mechanization, as well as the (often unsustainable) application of chemical fertilizer andirrigation, yields increased dramatically, leading to food becoming a smaller and smaller portion of the budget of the first-world consumer.

That green revolution has gone about as far as it can go.A combination of more erratic and warmer weather due to global warming, and the over-exploitation of aquifers are making water for farming a much scarcer resource.Meanwhile, rising fossil fuel prices due to increasing demand, combined with flat or diminishing supplies are making chemical fertilizer a much greater cost to the farmer, as well as making it much more costly to run farm equipment.

On top of this, biofuels are a new and growing source of demand for agricultural products.

I see a new pattern emerging.Water, food, and energy are each becoming scarcer, and as it becomes easier to convert one into another of the triad, their prices are becoming increasingly coupled, as they rise in unison.

Rising energy prices are generally a good thing (so long as they don’t rise too quickly), in my mind, because they increase the incentives to switch to new, less polluting forms of energy.Rising food prices will be a force for rural revitalization in the rich world, and may make third world farming more economic… so long as they have reliable access to water, which makes wise investment in water infrastructure all the more important.

A recent study of vegetable farmers in Ghana, for example, found that those irrigating their fields with wastewater carried by buckets earned a 230% return on their investment, versus 30% for big state-sponsored schemes.

The assessment argues that modest outlays on rain-fed agriculture, in particular, could drastically improve the productivity of farming in poor countries and so help both to raise farmers’ incomes and also to cut the need for an expansion of agriculture elsewhere. More than half of the world’s food comes from rain-fed farms, as opposed to irrigated ones. If the rains fail, so do the crops. Channels to harvest and direct rainfall and small, sealed reservoirs or tanks to store it, would not only see farmers through dry spells, but also allow them to entice bigger or more valuable harvests out of the same fields. More reliable income, in turn, allows farmers to invest more in seeds, fertilizer and machinery.

Like our energy infrastructure, our water infrastructure needs to become more diverse and distributed.“Think globally, act locally,” as they say.I like to add, “Unless you can act globally,” which is what the financial markets allow us to do… but this is one problem that the financial markets are not suited for.Just because I have a hammer, does not mean every problem is a nail, and wishing it were so will not change that.